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How Private Creditors Fared in Emerging Debt Markets, 1970-2000

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  • Klingen, Christoph
  • Weder di Mauro, Beatrice
  • Zettelmeyer, Jeronimo

Abstract

We estimate ex post returns to emerging market debt by combining secondary-market prices with observed flows based on World Bank data. From 1970–2000, returns averaged 9% per annum, about the same as returns on a ten-year US treasury bond. This reflects the combined effect of the 1980s debt crisis and much higher returns during 1989–2000. Annual returns since 1986 have been less volatile than emerging market equity returns but more volatile than returns on US corporate or high-yield bonds. Unlike returns on these bonds, however, emerging market debt returns do not seem significantly correlated with US or world stock markets.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4374.

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Date of creation: May 2004
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Handle: RePEc:cpr:ceprdp:4374

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Keywords: crises; returns capital flows; sovereign debt;

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References

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  1. William N. Goetzmann & Philippe Jorion, 1997. "Re-emerging Markets," NBER Working Papers 5906, National Bureau of Economic Research, Inc.
  2. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
  3. Michael Dooley & Richard D. Haas & Steven Symansky, 1993. "A Note on Burden Sharing among Creditors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 226-232, March.
  4. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 19-50, January.
  5. G. Andrew Karolyi & Rene M. Stulz, 2002. "Are Financial Assets Priced Locally or Globally?," NBER Working Papers 8994, National Bureau of Economic Research, Inc.
  6. K. Geert Rouwenhorst, 1999. "Local Return Factors and Turnover in Emerging Stock Markets," Journal of Finance, American Finance Association, vol. 54(4), pages 1439-1464, 08.
  7. Edwin J. Elton, 2001. "Explaining the Rate Spread on Corporate Bonds," Journal of Finance, American Finance Association, vol. 56(1), pages 247-277, 02.
  8. Giovanni Dell'Ariccia & Jeromin Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund.
  9. Rogoff, Kenneth, 1990. "Symposium on New Institutions for Developing Country Debt," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 3-6, Winter.
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Citations

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Cited by:
  1. Adam, Klaus & Grill, Michael, 2013. "Optimal sovereign default," Discussion Papers 09/2013, Deutsche Bundesbank, Research Centre.
  2. Juan J. Cruces & Christoph Trebesch, 2011. "Sovereign Defaults: The Price of Haircuts," CESifo Working Paper Series 3604, CESifo Group Munich.
  3. Lizarazo, Sandra, 2010. "Default Risk and Risk Averse International Investors," MPRA Paper 20794, University Library of Munich, Germany.
  4. Fernando Broner & Guido Lorenzoni & Sergio L. Schmukler, 2011. "Why Do Emerging Economies Borrow Short Term?," Working Papers 308, Barcelona Graduate School of Economics.
  5. Olivier Jeanne & Romain Rancière, 2011. "The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications," Economic Journal, Royal Economic Society, vol. 121(555), pages 905-930, 09.
  6. Hausmann, Ricardo & Sturzenegger, Federico, 2006. "Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations," Working Paper Series rwp06-003, Harvard University, John F. Kennedy School of Government.
  7. Michael Tomz & Mark L. J. Wright, 2013. "Empirical Research on Sovereign Debt and Default," NBER Working Papers 18855, National Bureau of Economic Research, Inc.
  8. James M. Boughton, 2005. "Does the World Need a Universal Financial Institution?," IMF Working Papers 05/116, International Monetary Fund.
  9. Ashoka Mody, 2004. "What is An Emerging Market?," IMF Working Papers 04/177, International Monetary Fund.

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